Renegotiation-proof Contracting, Disclosure, and Incentives for Effcient Investment

摘要

In general, disclosure by firms would seem to be valuable for reducing the information asymmetry that is a cause of investment inefficiency in firms. However, the effect of disclosure is subtle, especially when the link to firm value is endogenous and depends on incentives within the firm. We analyze various disclosure regimes and determine which ones are effective in eliminating the Myers-Majluf inefficiency in a model with optimal renegotiation-proof contracts. Disclosing only accepted contracts does not solve the Myers-Majluf problem, but either full transparency of all compensation negotiations or additional disclosure of a forward-looking announcement does. The model is robust to the presence of renegotiation in equilibrium and is also robust to changing who offers any renegotiation. The analysis helps to illuminate optimal disclosure regulation. For example, it tells us that allowing forward-looking disclosure is beneficial provided we are in an environment that produces the optimal contract, which gives the manager an incentive for truth- telling.